Despite the bluster of New York Attorney General Eric Schneiderman, daily fantasy sports (DFS) leaders DraftKings and FanDuel do not plan to go away quietly. Faced with the threat of losing the state that contributes the largest portion of their customer base, the two companies are fighting Schneiderman’s proclamation that fantasy sports is gambling and his order to them to remove themselves from the New York market.
Schneiderman came to his conclusion after a month-long investigation of DraftKings and FanDuel, initially spurred on by possible improprieties at the former when DraftKings employee Ethan Haskell accidentally published non-public information about NFL player draft trends for Week 3 before all NFL games had started. He then won $350,000 in a FanDuel contest, leading people to think that he had that information before anyone else and used it to help him construct his roster.
An internal and external, independent investigation both found that Haskell received the info forty minutes after FanDuel rosters locked and thus did not have an unfair advantage.
The investigation conducted by Schneiderman went beyond that, though, and dove into the operations of both companies.
In his statement about his ruling, Schneiderman said, in part:
Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers.
Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country. Today we have sent a clear message: not in New York, and not on my watch.
Both DraftKings and FanDuel have said they will use the five-day period that is allowed to fight the ruling. In a call with the media on Wednesday, FanDuel’s outside counsel Marc Zwillinger said that he believes he can convince Schneiderman that DFS is a game of skill and is not gambling.
The companies are prepared to engage in an extended legal battle if need be. “This is the beginning of a legal process and not the end of it,” Zwillinger said.
FanDuel CEO Nigel Eccles added, “If you don’t know football, you don’t know basketball, you will quickly find out it’s a game of skill.”
He also lamented Schneiderman’s decision, saying, “We’re a legal game. We feel the A.G.’s office has taken the very extreme and very sudden position that New Yorkers are not capable of making their own decisions when it comes to playing fantasy sports.”
FanDuel’s immediate response to the cease and desist letter, as well as a harsh public statement from Schneiderman, was less diplomatic:
This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, coworkers and players across the country. The game has been played — legally — in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal.
For its part, DraftKings is not pussy-footing around when it comes to its side of the fight. It has retained the services of hard-hitting attorney Randy Mastro, a former deputy mayor to Mayor Rudy Giuliani. Mastro hasn’t always been a guy who fights on the side that the public would necessarily favor – he has won pollution cases for Chevron and has helped fast food franchisees fight against a minimum wage increase – but he has certainly gotten results throughout his career.
On Thursday, Mastro told the New York Daily News, “I think it is shockingly irresponsible, irrational and illegal how the attorney general’s office is proceeding here.”
“To try to shut down businesses that have operated openly, transparently and legally in New York for the better part of a decade — it is shocking how the way the attorney general is proceeding,” he added.